The subjective intention test does not need to be used if there is both a disposal and an acquisition between connected persons. The connected persons rule, TCGA92/S18, states that this type of transaction shall be treated as if it were otherwise than by way of a bargain made at arm’s length.

The test will have to be used if there is

a transaction between unconnected persons, or

a transaction between connected persons, where there is

either an acquisition with no corresponding disposal, for example a share issue

or a disposal with no corresponding acquisition, for example the redemption of a debt.